COMMISSIONER OF INCOME-TAX/WEALTH TAX VS BABULAI KHINCHAND TRUST
2001 P T D 1893
[243 I T R 790]
[Madras High Court (India)]
Before R. Jayasimha Babu and Mrs. A. Subbulakshmy, JJ
COMMISSIONER OF INCOME‑TAX/WEALTH TAX
Versus
BABULAL KHINCHAND TRUST
Tax Cases Nos.280 to 286 and 806 of 1988 (References Nos.213 to 219 and 593 of 1988), decided on 18/11/1998.
Wealth tax‑‑‑
Exemption‑‑‑Charitable trust‑‑‑Trust deed providing that it settlor left no wife or children, trust property should be applied for such charitable purposes as may be decided upon by trustees‑‑‑Deed had specifically provided for application of property for charitable purposes‑‑‑Trust was a valid charitable trust‑‑‑Indian Wealth Tax Act, 1957.
A trust was created by a deed, dated October 10, 1986. It provided that "if, however, the settlor leaves no wife or children, the trust properties shall be applied for such charitable purpose as may be decided upon by trustees". On the question whether the trust was a valid charitable trust:
Held, that the trust deed clearly provided that the trust property should be applied for such charitable purpose as may be decided upon by the trustees. The discretion given to the trustee was not to choose any purpose, but only purposes which were charitable for which the trust properties and income therefrom could be utilised. The word "properties" in the trust deed, having regard to the context must be understood as including the income derived from the properties, as the deed specifically provided that the trust property should be applied for charitable purposes. The reference to the application would indicate that the author of the trust intended that all that belonged to the trust was to be utilised for the purpose of charity. The mandate was, therefore, clear that the properties of the trust which having regard to the context, should include the income from the properties, should be applied solely for charitable purposes. The trust was a valid charitable trust.
Gangabai Charities v. CIT (]992) 197 ITR 416 (SC) ref.
R. Sivaraman for the Commissioner.
P.P.S. Janarthana Raja for the Assessee.
JUDGMENT
R. JAYASIMHA BABU, J.‑‑‑The question referred to us at the instance of the Revenue is:
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in holding that the trust is a valid charitable trust and in directing the Wealth Tax Officer to redo the assessments in the light of the provisions of section 21(l) read with section 21A of the Wealth Tax Act, 1957?"
The trust referred to is one which was created under the deed, dated October 10, 1986, The trust deed has not been produced before us. It is agreed by learned counsel for the parties that the crucial part of the trust deed relevant for the purposes of this case is the part that there has been set out in the Tribunal's order. That part reads thus:
"If, however, the settlor leaves no wife or children, the trust properties shall be applied for such charitable purpose as may be decided upon by the trustees."
The Tribunal has held that the trust is created when the settlor leaves no wife or children as has in fact happened. The trust so created has been held to be one which is charitable and the properties of the trust, it has, been held by the Tribunal, are properties which are required to be applied for the charitable purposes such charitable purposes to be decided upon by the trustees.
It is not the case of the Revenue that the income of trust has‑ been applied for any purpose which cannot be regarded as charitable purpose. The Supreme Court in the case of Gangabai Charities v. CIT (1992) 197 ITR 416 held that the crux of the statutory exemptions under section 11(1)(a) of the Act is not the income earned from the property held under the trust but the application of the said income for religious and charitable purposes and that it is, therefore, necessary to indicate in the trust deed the broad objectives and the income derived from the properties is to be utilised. The trust deed here clearly provides that the trust property shall be applied for such charitable purpose as may be decided upon by the trustees. The discretion given to the trustee is not to choose any purpose, but only purposes which are charitable for which the trust properties and income therefrom can be utilised.
The word "properties" in the trust deed, 'having regard to the context must be understood as including the income derived from the properties, as the deed specifically provides that the trust property shall be applied for charitable purposes. The reference to the application would indicate that the author of the trust intended that all that belonged to the trust is utilised for the purpose of charity. The mandate is, therefore, clear that the properties of the trust which having regard to the context, should include the income from he properties, should be applied solely for charitable purposes.
We, therefore, answer the question referred to us in favour of assessee and against the Revenue.
M.B.A./453IFCReference answered.